If you're a business operating in the EU, or with significant ties to it, the new Corporate Sustainability Reporting Directive (CSRD) will be directly impacting you. The rules surrounding sustainability reporting are tightening, and failing to understand what’s required could lead to penalties or reputational risk.
Understanding compliance with the CSRD is no longer optional—it’s a necessity. This article covers everything you need to know about the CSRD and its compliance requirements.
What is CSRD Reporting?
CSRD reporting is a major shift in how companies disclose sustainability information. It builds on the previous Non-Financial Reporting Directive (NFRD) but goes much further.
Now, companies have to provide detailed reports not only on environmental, social, and governance (ESG) factors but also on how these factors impact their business and how their activities affect the broader society and environment.
Under CSRD, reporting is no longer optional or surface-level. Companies have to address both:
The risks and opportunities that sustainability poses to their business.
The impact of their business on the environment, human rights, and social issues.
This dual focus ensures that sustainability is treated as a core business issue, influencing both strategy and operations.
Key Requirements of CSRD Reporting
1. Who Needs to Comply with CSRD
Under the Corporate Sustainability Reporting Directive (CSRD), compliance obligations extend to a wide range of organizations. In particular, the directive applies to:
Large companies within the European Union (EU), including those already subject to existing non-financial reporting requirements.
Small and medium-sized enterprises (SMEs) that are publicly listed, though they have slightly modified obligations compared to larger firms.
Non-EU companies that conduct significant business activities in the EU. Specifically, this includes non-EU companies generating more than €150 million in annual revenue within the EU.
This broadening of scope means that CSRD will impact far more businesses than previous regulations. Initially, around 11,000 companies were required to report under the previous Non-Financial Reporting Directive (NFRD).
However, with the introduction of CSRD, the number of affected companies is expected to grow significantly—reaching approximately 50,000.
This expansion reflects the growing demand for transparency and accountability in corporate sustainability practices. If your organization falls under one of these categories, preparing for compliance is important.
2. Scope and Coverage of the Directive
CSRD reporting covers a wide range of areas to ensure companies provide a comprehensive view of their sustainability practices. The directive focuses on environmental, social, and governance (ESG) factors, requiring detailed reporting on both qualitative and quantitative metrics.
This means you'll need to disclose specific data points along with narrative descriptions to give a full picture of your company's impact.
CSRD requires companies to look into non-financial impacts as well. You'll need to report on how your business activities affect the environment, employee well-being, and overall social responsibility.
The goal is to create transparency for stakeholders, including investors and customers, regarding how your company is managing risks and opportunities related to sustainability.
Key areas covered under the CSRD include:
Environmental factors: Emissions, resource use, energy consumption, and waste management.
Social factors: Labor practices, diversity, human rights, and community impact.
Governance factors: Business ethics, anti-corruption measures, and leadership accountability.
3. Reporting Content Requirements
CSRD reports have to provide a comprehensive view of how a company addresses sustainability risks and impacts. This includes disclosing information on environmental, social, and governance (ESG) factors.
Companies are required to explain how these risks and impacts are integrated into their overall business strategy and operations. By doing so, stakeholders can assess how well-prepared a company is to manage sustainability challenges while balancing its financial goals.
One of the core aspects of CSRD reporting is the "double materiality" principle. This means companies need to assess and report on two dimensions:
Business Impact: How sustainability issues, such as climate change or resource scarcity, could impact the company’s financial performance and long-term viability.
External Effects: How the company's operations and activities affect the environment, society, and broader economy. This could include carbon emissions, labor practices, or supply chain impacts.
Both dimensions are equally important in CSRD reporting, ensuring that companies take accountability for their role in broader societal and environmental outcomes, as well as managing risks to their own business.
4. Timeline for Implementation
The CSRD introduces a phased implementation timeline to help companies gradually align with the new sustainability reporting requirements. The staged rollout ensures that organizations have enough time to adapt their processes and gather the necessary data for compliance.
The first deadline begins in 2024. Large public-interest companies, those already subject to the Non-Financial Reporting Directive (NFRD), will need to comply with CSRD standards. This stage applies to roughly 11,000 companies across the European Union.
By 2025, the scope will expand to include large companies not previously covered by the NFRD. These are businesses that meet at least two of the following criteria:
More than 250 employees
More than €40 million in turnover
More than €20 million in total assets
Finally, by 2026, CSRD compliance will extend to listed small and medium-sized enterprises (SMEs), as well as other entities that fall within the EU’s jurisdiction.
Each stage comes with specific guidance to help businesses align gradually with the reporting standards. Companies are encouraged to start preparing early to avoid last-minute rushes and ensure a smooth transition to compliance.
Align CSRD with Existing Reporting Standards
CSRD reporting aligns closely with the European Sustainability Reporting Standards (ESRS), which are issued by the European Financial Reporting Advisory Group (EFRAG). These ESRS guidelines are designed to help companies meet CSRD compliance requirements by providing a clear framework for sustainability reporting.
One of the main objectives of ESRS is to ensure consistency and transparency across EU companies. By following these EU-specific guidelines, you will ensure that your sustainability reports are consistent with the expectations set out by CSRD.
This is important because the CSRD requires companies to provide detailed, non-financial information, which has to be comparable across different organizations.
ESRS also plays a key role in making sustainability reports more useful for stakeholders. The standards help align reporting practices across companies, allowing stakeholders—such as investors, regulators, and customers—to easily compare sustainability performance.
When organizations follow ESRS guidelines, stakeholders gain better insights into companies’ environmental, social, and governance (ESG) activities.
Steps to Achieve CSRD Compliance
1. Assess Current Reporting Gaps
To ensure your company complies with the CSRD standards, the first step is to assess where your current reporting practices fall short. This allows you to spot areas needing improvement and is critical for aligning with the directive's requirements.
Start by conducting a gap analysis. This involves reviewing your existing sustainability reports (if any) and comparing them against the CSRD's obligations. Identify all the disclosure elements that are missing or insufficiently covered in your current reporting.
Pay special attention to areas like climate-related risks, social factors, and governance practices, as these are emphasized under CSRD.
Next, involve key stakeholders in this process. Stakeholders such as department heads, sustainability officers, and even external consultants can provide valuable insights into which areas of reporting are the most critical for transparency and compliance. By collaborating with them, you can better determine:
Which environmental, social, and governance (ESG) metrics are most material to your business?
Whether you're adequately capturing data that reflects your company’s impact across its entire value chain.
Which internal processes might need to be adjusted or built from the ground up to meet CSRD criteria?
2. Establish Internal Sustainability Processes
Internal sustainability processes help ensure that the necessary data is collected, tracked, and reported accurately. A well-structured approach involves assigning clear roles and responsibilities within your organization and forming a cross-functional team to oversee the compliance effort.
The first step is to define who will be responsible for gathering and reporting sustainability data. You need to assign specific roles to individuals or departments, ensuring that there is accountability for each area of data collection.
Next, form a cross-functional team dedicated to CSRD compliance. This team should include members from various departments, such as finance, legal, operations, and sustainability, to ensure that all areas of the organization are covered.
By bringing together different perspectives and expertise, you strengthen your ability to meet the directive's requirements comprehensively.
Both these steps—defining roles and establishing a cross-functional team—are important to streamline your internal processes for successful CSRD reporting.
Whistleblowing Software also offers customizable reporting channels that can be tailored to meet an organization's specific needs, making it easier for businesses to address whistleblowing requirements effectively.
3. Data Collection and Management
You will need to implement systems capable of collecting reliable data. These systems should cover all relevant ESG metrics and ensure that data is captured consistently across your entire organization.
This includes information on emissions, resource consumption, labor practices, and other key sustainability indicators. Without a system to gather high-quality data, your report will lack the necessary credibility.
Equally important is ensuring proper data traceability and auditability. This means that any data collected has to be fully traceable back to its source. You should be able to verify where the data came from, how it was collected, and any transformations it underwent.
This level of transparency is important in proving that your reporting accurately reflects real-world operations. It also enables auditors to review your data, further improving trust in your reports.
4. Align with Reporting Standards
To align your reporting practices with the CSRD requirements, you need to work closely with the European Sustainability Reporting Standards (ESRS). These standards are specifically designed to ensure consistency across companies' sustainability reports and are the framework through which the CSRD measures compliance.
One of the core tasks you should focus on is conducting a materiality analysis in line with the ESRS framework. This is important to determine which sustainability issues are most relevant to your business operations and stakeholders.
The ESRS materiality analysis looks at both financial materiality (how sustainability issues impact your company’s financial performance) and impact materiality (how your company’s activities affect the environment and society).
In practice, aligning with ESRS involves:
Ensuring that your sustainability reporting is consistent with the specific requirements of ESRS, which cover areas like environmental, social, and governance (ESG) factors.
Conducting a double materiality analysis, where you assess not only how sustainability issues affect your business but also how your company impacts broader societal goals.
Regularly updating your materiality assessment to reflect changes in both the regulatory environment and your business activities.
5. Develop a Compliance Roadmap
Developing a compliance roadmap involves several critical steps that will guide your organization through the process. Here's how to build a solid plan for maneuvering through CSRD requirements efficiently:
First, create a compliance timeline. This timeline should contain specific milestones that align with the phased implementation schedule of the CSRD.
Begin by identifying the key reporting deadlines and work backward to set achievable intermediate goals. These milestones might include:
Initial internal assessments of current reporting capabilities.
Establishing internal sustainability processes.
Completing key data collection tasks.
Aligning your reporting with recognized standards.
Next, it's important to train internal teams on sustainability standards. CSRD compliance requires a deep understanding of various sustainability metrics, reporting frameworks, and data collection methods.
Making sure your teams are well-versed in these areas is important. Training should focus on:
Familiarizing teams with the specific requirements of CSRD.
Providing education on data management and reporting tools.
Ensuring cross-departmental collaboration for cohesive reporting.
Training sessions can be done in-house, or you might consider bringing in external experts to ensure comprehensive knowledge transfer.
By combining a clear timeline with targeted training, your organization will be better equipped to meet the demands of CSRD.
Whistleblowing and Its Role in CSRD Compliance
Whistleblowing plays an important role in ensuring the accuracy and credibility of sustainability reports under the Corporate Sustainability Reporting Directive (CSRD). When employees or other stakeholders have a secure way to report issues, it becomes easier to identify non-compliance or mistakes in reporting.
A whistleblowing mechanism supports transparency by allowing individuals to flag inaccuracies or unethical practices in the data that companies submit. This, in turn, boosts accountability, as organizations are more likely to correct errors and follow the required guidelines when they know there is a process in place for internal or external scrutiny.
Whistleblowing Software provides a GDPR-compliant whistleblowing channel that ensures secure, anonymous reporting, making it an effective tool to support CSRD compliance by helping companies maintain transparency and accountability in their sustainability reporting processes.
Whistleblowing also safeguards the integrity of the entire CSRD reporting process. By enabling early detection of issues, these mechanisms help ensure that the sustainability data reported is both accurate and reliable.
In short, whistleblowing helps maintain compliance by:
Detecting non-compliance or inaccuracies in sustainability reports.
Promoting transparency in how reports are compiled and submitted.
Supporting accountability at every level of the reporting process.
By encouraging open communication, companies reinforce the trustworthiness of their sustainability disclosures.
Conclusion
CSRD reporting is both a regulatory obligation and a strategic opportunity for companies. Compliance fosters transparency, but it also strengthens corporate accountability and long-term sustainability.
Prioritizing the development of structured, comprehensive reporting systems will ensure smoother adaptation to these evolving requirements. With careful planning, businesses can not only meet compliance deadlines but also improve their role as responsible corporate citizens.
Whistleblowing Software is a secure platform designed to help companies meet regulatory compliance, including CSRD requirements, by offering reliable channels for anonymous reporting.
Contact us today to ensure compliance with CSRD standards using our Whistleblowing Software.
FAQ
What Is CSRD Reporting?
CSRD is an EU directive requiring companies to report on environmental, social, and governance (ESG) factors. It ensures transparency in sustainability practices for large companies and listed SMEs.
Who Should Report to CSRD?
Companies with over 250 employees, €40 million turnover, or €20 million in assets must report, as well as all listed companies (excluding listed micro-enterprises). Non-EU companies with €150 million+ in EU turnover must also comply.
Which Companies Need to Report on CSRD?
Large companies, publicly listed firms, and some SMEs that meet two of the criteria (250+ employees, €40M+ turnover, €20M+ assets) need to comply. Non-EU firms with major EU activities must report if they earn over €150 million in EU revenue.
What Is the CSRD Human Rights Reporting?
Companies must disclose their impact on human rights, including risks, actions, and outcomes, to ensure transparency and social accountability.
When Do I Need to Start CSRD Reporting?
Large entities (500+ employees): Start in 2025 for the 2024 financial year.
Other large companies: Start in 2026 for the 2025 financial year.
Listed SMEs and others: Start in 2027 (can be delayed to 2028) for the 2026 financial year.
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